Reflecting on 2024: A year of cautious progress and evolving trends

Central banks walk a tightrope

In 2024, central banks began reversing recent aggressive rate hikes introduced to combat soaring inflation. However, the process has been gradual, constrained by persistent strong wage growth across Europe. The cost-of-living crisis and long-term demographic shifts drove salaries higher, creating a fine line for policymakers to balance between reducing rates to stimulate growth and avoiding a resurgence of inflation.

"2024 was a year of measured progress," said Anna Zabrodzka-Averianov, Senior Economist at Intrum. "Lower rates have been supporting recovery, but wage pressures remained a concern for policymakers navigating this transition."

While policy rates trended downward, they remained elevated compared to pre-inflationary levels, leaving consumers and businesses cautiously optimistic about the future.

Uneven economic recovery

Economic activity in Europe showed signs of recovery, but the progress was far from uniform. Southern European nations, including Spain and Greece, , emerged as growth leaders, while the usual economic powerhouse - Germany -  and Sweden lagged behind.

Political instability in key economies, combined with external pressures like potential trade tensions with US and weak demand from China, exacerbated the challenges for manufacturing and business confidence.

"Europe’s recovery in 2024 reflected a tale of two speeds," observed Zabrodzka-Averianov. "While some countries advanced, others struggled under the weight of external and domestic pressures."

The disparities in recovery created additional risks, with businesses in weaker economies grappling with still elevated borrowing costs and rising bankruptcy rates.

AI investments shift from hype to reality

One of the most striking shifts in 2024 was the cooling of the fervour surrounding artificial intelligence (AI). While AI continued to demonstrate transformative potential, investors and businesses began adopting a more measured approach. Generative AI, once heralded as a game-changer, faced increasing scrutiny over its profitability and real-world applications.

Despite this, AI remained a significant force in reshaping industries, particularly in personal finance and debt management. Consumers embraced AI tools for their perceived objectivity and efficiency, though concerns over privacy and the lack of human empathy persisted.

"After the year of hype, the market began evaluating AI with a more critical lens," said Zabrodzka-Averianov. "This recalibration is a natural step in integrating groundbreaking technologies into sustainable business practices."

Looking ahead, AI’s potential remains vast, but its development will require long-term investments and a balance between innovation and human oversight.

A year of cautious optimism

As 2024 drew to a close, Europe’s economic journey reflected both progress and lingering uncertainties. Central banks laid the groundwork for recovery through gradual rate cuts, while economic disparities underscored the need for tailored approaches to growth. The AI landscape entered a new phase of maturity, balancing innovation with realistic expectations.

"2024 reminded us that recovery is not linear," concluded Zabrodzka-Averianov. "The challenges of this year underscore the importance of resilience, adaptability, and forward-thinking strategies as we step into 2025."